3.2. Estimating Economical Useful Life

Try these first

1. 1.

   Define economic useful life in your own words.

   Hint

   Consider both cost and profit.

2. 2.

   What does downtime cost refer to?

   Hint

   Think about repairs or maintenance.

3. 3.

   What does economic useful life refer to?

   • A) Total lifespan of the equipment
   • B) Time period for maximum cost efficiency
   • C) Duration until machine breakdown

   Hint

   Think about what makes financial sense.

4. 4.

   True or False? Downtime costs only include the costs of repairs.

   • True
   • False

   Hint

   Consider all aspects of non-operation.

5. 5.

   You manage a fleet of construction vehicles. One vehicle costs $200,000 and requires about$40,000 in repairs annually. A newer model costs $300,000, with an expected lifespan of 5 years and maintenance costs of$15,000 annually. Analyze the financial implications and decide whether the older vehicle should be replaced.

   Hint

   Total costs over the expected lifespan must be compared.

6. 6.

   Assess how inflation could influence the decision to purchase a critical piece of equipment, considering current pricing trends and potential future costs.

   Hint

   Consider long-term investment metrics.